Every Thursday until December, we will feature in City A.M.’s ‘Building Britain’s Businesses’ segment, highlighting important issues that affect many SME businesses and the economy.
Have you noticed any change in small business’ appetite for finance since the Brexit vote?
Not really. The unsecured lending side of our business is rapid – with many transactions completing within just a day – so any impact would have shown up. However, we did see uncertainty in the few weeks before and after the vote.
How does LDF fit into the broader business finance market?
We’re focused on SME lending, in particular business with between one and fifty employees. We operate a customer base that is divided evenly between corporate businesses and professional firms, across a broad sector base.
Our customers tend to borrow for three main reasons. Some are looking for asset finance to allow them to acquire new equipment or vehicles; others want a generic loan for expansion through our business development loan. Another popular option is our unsecured loan for cash flow management, which helps to fund specific spikes in outgoings such as VAT and tax payments.
You’ve been operating in this sector for over 30 years. How has the business finance landscape changed?
In the last five years in particular, there has been significant growth in what is known as alternative finance, with both new and existing firms developing models to take up the slack from banks cutting back on their SME lending, especially in areas like asset finance. Banks are now allocating their capital very differently after the financial crisis, and unfortunately, this has had implications for the SME market.
The industry has also become more technologically-driven, with finance companies putting a great deal of investment into customer platforms that offer solutions outside of those typically offered by high street banks.
This has meant that small businesses have become better able to access services like cash flow loans and asset finance quickly and with greater flexibility via alternative providers, while still using complementary bank services.
Is there more the government should be doing to put SME funding firmly on the agenda?
The government has been incredibly supportive of SMEs, particularly through the British Business Bank. It has recognised that helping smaller companies grow is a major issue and has put the infrastructure in place to make it easier for them to access finance.
There’s always more to do in terms of education and that is a job for the industry as much as government. There is an incorrect perception, for example, that alternative finance is much more expensive than bank finance. We need to get the message out that we are champions of small business growth and will work in partnership with SMEs to make it happen.
What other challenges do smaller businesses face in accessing finance?
A very large percentage of SMEs are sole traders. They spend their time running their businesses, and so finance tends to be something they do at the weekends. If a bank says no, it’s vital they know where else to turn to.
Bank lending processes can also be quite complex, requiring the business to provide a large amount of information, and this is of course one of the issues the alternative finance industry is seeking to solve. We’re saying to SMEs: we’ll make it simpler for you.
You can also view the feature 'Why we’re backing Britain’s resilient and optimistic small businesses’ here.
Don’t forget to check out the next instalment in ‘Building Britain’s Businesses’ this Thursday (15th September) in publication and online.